Alberta has, in the past, greatly profited from the policy missteps of competing oil jurisdictions. Probably its biggest boost came from Hugo Chavez, the late Venezuelan despot who raised royalties, revised contract terms and talked tough against oil companies. Oil majors that were developing bitumen projects in Venezuela’s Orinoco region packed up and redeployed their cash and skills to Alberta’s similarly unconventional deposits, despite the greater technical and market access challenges. Newfoundland, Saskatchewan and British Columbia also did their bit to make Alberta richer by pushing policies at various times that sought more benefit from oil and gas development than companies were prepared to pay.

Today, Alberta is the policy outlier. The climate change plan announced in November by Rachel Notley’s NDP government imposes higher environmental protection standards on Alberta oil than any other oil jurisdiction has, while subsidizing development of green energy. The plan’s most radical initiative is a 100-megaton-a-year greenhouse-gas-emissions cap for oilsands projects to “help drive technological progress.”

Unlike other aspects that are largely internally focused (such as the phase out of coal-fired electricity in favour of wind power and the $3-billion-a-year carbon tax), the cap broadcasts to world investors that much of Alberta’s oil deposits won’t be developed — and it’s being noticed. “Other than the recent and uncontrollable geopolitical challenges leading to a serious supply and demand imbalance, the most serious risk facing the energy industry today is policy error,” says Paul Vaillancourt, executive vice-president at Fiera Capital Corp., the large Montreal-based investment manager. “While every Canadian wishes for all our industries to be as environmentally friendly as possible… it’s also important to remember that rule No. 1 in times of crisis is ‘do no harm.’ ”

The cap was a last-minute addition to the NDP plan based on recommendations from four oilsands companies and four environmental organizations without consultation with the rest of the industry — or, apparently, anyone else. The hope was that it would lessen opposition to proposed oilsands pipelines. It’s quickly turning into a limitless blunder.

For one, there are no details on how the cap will be divided up, just promises to consult. Oilsands operations currently emit about 70 megatons a year of greenhouse gases from 2.3 million barrels a day of production. The new limit means that just 30 megatons remain available for future growth, representing only about one million barrels a day of additional production unless extraction becomes a lot more efficient.

But there is not enough room for all the permitted projects to go ahead. According to the Alberta Energy Regulator, 6.6 million barrels a day of oil sands production has been approved. Projects that have yet to receive permits may not make the cut altogether. And as an effort to reduce pipeline opposition, the plan has also failed miserably, as green groups take advantage of Alberta’s weak oilsands defence to ramp up their attacks. Not surprisingly, the quota is dividing the industry, since companies that until recently co-operated to accelerate environmental improvement now have to fight for their slice of growth. To top it off, the policy change couldn’t have come at a worst time, given Alberta’s deepest oil crash in a generation.

It’s such bad policy that there are doubts it will get far. “This is a 15-year carbon plan, and so there is a lot of ground to cover and potentially new policies and new governments,” says Calgary energy and environment lawyer Alan Harvie, a senior partner at Norton Rose Fulbright. “I wonder if indeed we are going to have 15 years of NDP rule along with a rigid 100-megaton cap.”

A lot of damage has already been done by presenting the provincial government as lacking the competence to manage even its signature policy priorities, the appreciation that such a radical energy transformation takes more than political edicts, and/or the understanding that without its oil advantage, Alberta is no different from Manitoba — though Alberta has overpriced real estate and far too many people.

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